Lawmakers considering overhaul of property-tax system

With a number of complaints coming this year over increased property taxes, state legislators are wondering if Utah should move to a California-type Proposition 13 tax-constraint system.

A legislative committee on Wednesday heard from experts and citizens on how Proposition 13, as it is known, has worked in California, saving homeowners millions of dollars since it was first adopted by citizen initiative in 1976.

Like many states, Utah has a fair-market-value type of property-tax system. Under law, county assessors are to re-assess each property each year. In theory, each home is fairly taxed each year.

But as recent big jumps in property taxes show, the Utah system is far from ideal.

Under an acquisition-based tax system, like Proposition 13, property owners will know what their home taxes are when they buy a house and know how much it can grow over time until they sell their home.

Before Proposition 13, California taxes averaged 2.6 percent of a home's value each year. That rate was dropped to 1 percent upon sale. And property taxes could only grow by 2 percent a year.

Rep. John Dougall, R-Highland, co-chairman of the Revenue and Taxation Committee, which heard the testimony Wednesday, said he doubts that Utah lawmakers want a pure Proposition 13 law.

"But we do want more accountability and predictability," said Dougall. Older Utahns in their homes for years should not see huge jumps in their property taxes, and fear being taxed out of their homes.

Deborah Herbert of Mapleton told lawmakers that she was a public education teacher in California in 1976. She said she and her husband were going to be taxed out of their modest home until Proposition 13 was adopted.

She moved to Mapleton several years ago because her family could afford to build a house for $175,000. But since then neighbors have built homes around hers costing upwards of a half million dollars. And now her home's property tax "has quadrupled."

A Proposition 13-type of property-tax system in Utah can save people like her, she said.

"I've never been in debt. I pay my bills. I've never declared bankruptcy," she said.

She and her husband have raised seven children and put most of them through college. But now again they face being taxed out of their home, she said.

Dougall said one bill is already being drafted that takes care of some of the shortcomings in Utah's current Truth In Taxation, which requires local property-taxing entities to hold public hearings before they raise taxes.

But even with Truth In Taxation, some Utahns are opening their tax bills and seeing "sticker shock, taxes up a couple of hundred bucks or even thousands of dollars in one year," Dougall told his House GOP caucus Wednesday afternoon.

An acquisition-based property-taxing system, where taxes can only go up a set amount until the house is sold and the new buyers start paying property tax at fair market value, could be an answer to those big jumps in taxes, legislators said.